A Piggy Back Mortgage also know as an 80/20, 80/15 or 80/10 is actually two loans a first and a second used to avoid paying mortgage insurance.Piggyback mortgages help you to qualify for a bigger house by avoiding the PMI payment.
Piggyback loans are becoming increasingly popular and are a way to avoid paying mortgage insurance.
Combo loans allow you to deduct the interest paid on your primary and second homes come tax time. Private mortgage insurance is not wholly tax deductible and therefore is not as appealing to many home buyers. Be sure to discuss any tax deductibility concerns with your accountant and loan officer.
A piggy back mortgage may actually help you lower your monthly payment. Loans with higher Loan To Values usually come with higher interest rates or PMI. Piggy Back mortgages may actually provide you with a lower interest rate and payment. Piggy Back loan rates when combined with first mortgage rates often have a blended rate which is lower than the same comparable 1 mortgage loan.
Besides avoiding Private Mortgage Insurance, Piggyback mortgages are also used to keep the first mortgage within the conforming loan amount. It 2006, the Fannie Mae conforming loan amount for single family homes is $417,000. Instead of paying the interest rate of a single Jumbo loan of $450,000, it may be benefitial to the home buyer to use piggyback loan program and break down the loan into two mortgages, the first mortgage of $417,000 and a second mortgage of $33,000.
You can get a piggyback mortgage from the same lender, but most lenders will allow for the second loan to be from a different lender, this may save you a lot of money.
